Do You Know When And Why You Need A Life Insurance Policy?
Every individual wants to secure the lives of their loved ones. When it comes to having a financial backup for your family in your absence, life insurance comes into the picture. The insurance company provides the policyholder with a life cover, and in return, the policyholder is required to pay a premium. The nominee will receive the death benefit if the policyholder passes away within the policy’s term. life cover from the insurance company. The life cover is an income replacement for the nominee and is the financial backup they can rely on.
If you are contemplating purchasing life insurance plans, read further to get clarity on why you need one and when you should buy one-
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Why do you need life insurance?
Everybody knows the relevance of life insurance, however, since they do not find it an immediate need, they usually procrastinate their purchase. However, the truth is that life is unpredictable, and an unfortunate scenario might have devasting repercussions for you and your loved ones. This is where the benefits of life insurance come into the picture. Here are some primary reasons why having life insurance is a must-
Provides financial security
When you are making money, you can provide for your family and give them a good quality of life. However, in case of your sudden loss of life, your family will likely face financial turmoil and emotional trauma. If you had life insurance, your family would find themselves in a financially secure place even in your absence. The sum assured that the nominee receives acts as an income replacement in your absence.
Helps in paying off liabilities
Over the years, there is a likelihood that you may have taken some loans and borrowings for huge expenses like buying a house or starting a business. However, in case of your sudden loss of life, your family would be liable to pay off your debts. In your absence, they might struggle to pay your liabilities. However, if you had life insurance with a sufficient sum assured, your family can easily pay off your debt in your absence. Use a life insurance premium calculator to get an estimate of the premium payable for your required sum assured.
Life insurance is also a popular tax-saving instrument. This is because the premium that you pay towards life insurance is subjected to deductions as per Section 80C of the Income Tax Act. Also, the payout that the nominee receives in your absence is subjected to an exemption according to Section 10 (10D) of the Income Tax Act.
When should you buy life insurance?
Once you know the importance of buying life insurance, the next step is figuring out when is the right time to purchase one.
Buy as early as possible
Age is one of the major factors that is taken into consideration while estimating the premium of your term insurance plan. The earlier you buy a life insurance plan, the lower your premiums are likely to be. This allows you to lock in a life insurance plan with a high sum assured for a lower premium. You get the maximum benefits of life insurance when you buy one early.
When you have dependents
If you have any individual who relies on you financially, you must have life insurance. Be it your children, your spouse, or your parents, anyone whose expenses you take care of partially or completely is financially dependent on you.
When you have any liabilities
If you have taken a huge loan or borrowed an amount that will continue to be completely returned for years, like a home loan, you must have a life insurance plan. A life insurance policy helps your family pay off these liabilities in your absence.
Choose riders as per your needs
When you are buying life insurance, depending upon your lifestyle and family history, you can choose riders as well along with your base plan. Riders are additional perks that you get from your insurance plan. You have to pay additional premiums for them. The common riders that most life insurance plans offer are critical illness, accidental death cover, guaranteed insurability, waiver of premium, and return of premium riders. You can use a life insurance premium calculator to get an estimate of the additional premium you need to pay for the additional coverage.
Once you get clarity on why you need life insurance and when you need life insurance, the next step would be buying one. Check several life insurance plans online and compare them before narrowing your purchase.